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Executive Summary

A.L. LABS $220 MIL. ACQUISITION FUND ESTABLISHED through a loan commitment from 11 European banks. The two-year commitment from a consortium led by the Union Bank of Norway is designed to allow A.L. Laboratories to pursue acquisitions in the area of human pharmaceuticals and animal health. A Sept. 6 press release announcing the signing of the loan agreement explains that A.L. Labs will focus its acquisition interests on "specialty growth markets." The company's existing market niches are in liquid pharmaceuticals, topical creams and ointments, and inhalant and aerosol products. A.L. Labs is a manufacturer of generic drugs with annual sales of about $260 mil. from operations in both the U.S. and Europe. From Danish roots (Dumex), the company has built a U.S. presence in the generic drug business over the past four years through a series of acquisitions. The first U.S. acquisition was announced in August 1986, when ParMed was purchased for approximately $8.5 mil. The ParMed purchase was quickly followed up with the acquisition of Barre-National, a liquid pharmaceuticals manufacturer, from Revco for approximately $97.6 mil. On August 7, A.L. announced the acquisition of NMC Labs, a producer of topical ointments and creams. The terms of the NMC purchase were not disclosed ("The Pink Sheet" Aug. 13, T&G-2). Despite the overseas source of funding, A.L. Labs will continue to pursue the U.S. market as its primary area for acquisitions with attention focused on generic companies. A.L. Labs Chairman Roy Cohen noted that the firm prefers to work in the U.S. "because of the huge markets available through only one regulatory approval." Prior to line of credit, A.L. Labs did not have many funds readily available for purchases. According to its most recent annual report, the firm had $2.8 mil. in cash and$20.4 mil. in unused lines of credit. The firm had $39.8 mil. in senior long-term debt and $61.9 mil. in long-term convertible subordinated debt. In its 1989 annual report, issued this year, the company noted that it was working on the line of credit and reported considering "several small acquisitions." The company has a target of annual sales of $1 bil. by the year 2000. A.L. Labs reports development work on a product for periodontitis in Scandinavia. The company expects to submit data for overseas registrations for that product in 1991. A.L. Labs intends to pursue the product in the U.S. as well. The project is based on a drug that is already available in generic form. In addition to growing by acquisition, A.L. Labs has been trying to trim back low margin products. The company reports that as a result of A.L.'s decision to "de-emphasize lower margin products, particularly human nutrition products," the Lab's most recent quarterly revenue figures showed a drop from $67 mil. in 1989 to $65 mil. for the period ended June 30.



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